In complex group structures where goods move across borders without a commercial sale, customs authorities expect valuation methodologies to be supported by disciplined cost analysis and robust documentation.

Company:
GlobalMed Devices Ltd.

Head Office: Boston, USA

UK Subsidiary: GlobalMed UK Ltd., Manchester

Product:
Diagnostic Medical Scanners (Model: ScanX3000)

Trade Flow:
Intra company shipment from GlobalMed Devices Ltd. (USA) to its wholly owned UK subsidiary, GlobalMed UK Ltd.

Transaction Overview:
GlobalMed UK imports medical scanners from the parent company in the USA. As the intra group transaction lacks a defined sale (goods are transferred at zero invoice or internal transfer pricing only), Method 1 (transaction value) is not acceptable. Methods 2 and 3 are also inapplicable due to the absence of identical or similar goods sold for export to the UK under comparable conditions. The goods are not resold in the same condition, rendering Method 4 (deductive value) inappropriate.

The company proceeds to declare the customs value using Method 5, computed value, as per Article 6 of the WTO Customs Valuation Agreement.

Computed value calculation

Under Method 5, the customs value is based on the cost of production plus an amount for profit and general expenses typically reflected in sales of goods of the same class or kind to the UK.

• Cost of Production (documented from internal cost sheets and financial records):

Subtotal A: $6,500

• Profit and General Expenses (reasonable addition based on company transfer pricing (TP) policy and market benchmarks):

Subtotal B: $1,170

Total Computed Customs Value (USD):
$6,500 + $1,170 = $7,670 per unit

Documentary evidence

To justify this customs value, the following supporting documents were retained and made available:

1. Cost breakdown sheets – Signed by the finance controller, with an itemised listing of all direct and indirect costs.
2. Raw material invoices – Third party supplier invoices confirming purchase price and quantities used.
3. Labour cost records – Payroll reports and time allocation showing hours per unit.
4. Overhead allocation methodology – Internal costing policies and year end reports validating indirect cost assumptions.
5. Internal audit report – Confirming accuracy of computed costs.
6. Declaration to customs – Import declaration with Method 5 cited as the basis of valuation, including reference to evidence supplied on request.

For further case studies and deeper practical guidance on applying customs valuation methods across complex group structures, explore the full Exporters Guide here